The Income Tax Appellate Tribunal (ITAT), Kolkata Bench while granting the relief to PwC deleted disallowance of loss arising from foreign exchange fluctuation in respect of Foreign Currency Hedging Contracts.
The assessee, M/s. Pricewaterhouse Coopers Private Limited is a company and is primarily engaged in the activity of providing management consultancy services and also accounting and business advisory services. It filed its return of income on 29/09/2009 declaring total income of Rs.22,42,11,130/-. The return was revised twice and in the second revised return of income, the assessee disclosed total income of Rs.22,64,57,400/-.
The Assessing Officer passed an order under section 143(3) of the Act, determining the total income of the assessee at Rs.155,42,46,330/- interalia disallowing the claim of the assessee of loss incurred on foreign exchange and making disallowance on depreciation on lease assets, disallowance of charges paid to PWC firms and making additions on account of disallowance of non- compete fee and non-refundable grant.
The issue raised was whether the AO erred in disallowing the loss arising from foreign exchange fluctuation in respect of Foreign Currency Hedging Contracts.
The coram of Aby T. Varkey and J. Sudhakar Reddy held that the losses which are arising due to the foreign exchange fluctuation should be accounted for in the books of accounts and accordingly the assessee is eligible to claim the deduction of such losses.
Therefore, the ITAT deleted the disallowance of Rs. 84,40,93,680 on account of loss on foreign exchange derivatives and allowed the ground of the assessee.
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